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Financial impact of absence

The financial impact of employee sickness has more factors than the cost of salary cover. In this TV show Matthew Haswell discusses the high cost of absence.

Quantifying the financial impact of employee sickness

Various studies and research has been conducted on trying to quantify the cost of absence, it’s very difficult to quantify the cost of absence but a couple of pieces of research have been done by the CIPD, the confederation of British industry, various insurance companies and companies that are dealing in health and wellbeing, as a very broad brush cost perhaps up to three billion pounds a year is lost by UK business in terms of sickness absence. Now when you break that down across the employees in the country that works out at about £600 per employee per year, so if you’ve got 1500 employees, £600 per year is likely to be your cost to you as an employer for sickness and absence. Now those costs aren’t just the cost of paying sick pay, because those costs, depending on contracts for employment and sick pay policies, won’t necessarily be particularly onerous, but in conjunction with other factors and other costs associated costs, I mean if someone goes off sick, particularly if they’re off long term sick, their work doesn’t disappear, you have to have someone to actually fill that gap, especially if they’re a, I don’t know, a senior person in IT or a sales person, there’s loss of productivity, there’s if you want to get short term staff to come in and do their work, there’s a salary cost to them, disruption of the business, training, time, people committing time to actually train new people and find their way. And also there’s a lag of course as well because a new person won’t just pick up and run with someone’s work who’s off sick. So the cost isn’t just necessarily the payroll cost or the salary cost of all of the sickness absence cost, it’s the associated business cost as well

Browse Inside Finance TV for more detailed examples of common issues that can have a considerable financial impact on a business.

Financial impact of absence

The financial impact of employee sickness has more factors than the cost of salary cover. In this TV show Matthew Haswell discusses the high cost of absence.

Quantifying the financial impact of employee sickness

Various studies and research has been conducted on trying to quantify the cost of absence, it’s very difficult to quantify the cost of absence but a couple of pieces of research have been done by the CIPD, the confederation of British industry, various insurance companies and companies that are dealing in health and wellbeing, as a very broad brush cost perhaps up to three billion pounds a year is lost by UK business in terms of sickness absence. Now when you break that down across the employees in the country that works out at about £600 per employee per year, so if you’ve got 1500 employees, £600 per year is likely to be your cost to you as an employer for sickness and absence. Now those costs aren’t just the cost of paying sick pay, because those costs, depending on contracts for employment and sick pay policies, won’t necessarily be particularly onerous, but in conjunction with other factors and other costs associated costs, I mean if someone goes off sick, particularly if they’re off long term sick, their work doesn’t disappear, you have to have someone to actually fill that gap, especially if they’re a, I don’t know, a senior person in IT or a sales person, there’s loss of productivity, there’s if you want to get short term staff to come in and do their work, there’s a salary cost to them, disruption of the business, training, time, people committing time to actually train new people and find their way. And also there’s a lag of course as well because a new person won’t just pick up and run with someone’s work who’s off sick. So the cost isn’t just necessarily the payroll cost or the salary cost of all of the sickness absence cost, it’s the associated business cost as well

Browse Inside Finance TV for more detailed examples of common issues that can have a considerable financial impact on a business.

Artificial intelligence and cognitive computing is the latest in a series of technological developments that have affected the value of human ability. Graeme Codrington discusses the development in this video.

Computers have the advantage

About 100 years ago if you wanted to be quite successful in the world it would have been very clever for you to be quite physically fit. Because in the industrial age, as before that in the agrarian age, in the age of farming the people who either owned the land or owned the factories or worked on the land or worked in the factories, they were the people who were in charge. Those were your assets, physical ability. What we’ve done over the last 100 years is replaced peoples’ physical, the physical needs in terms of what we need from them physically with machines, you know, the combined harvester and the container and the robots in factories. And then for the last 50 years we have ploughed our resources, as human beings we’ve become clever by being clever. We have moved into the information age where your mental ability is what sets you apart from other people. Now, somebody who was gifted at birth, not by my choice, but was gifted with a reasonable intelligence and a nice IQ and a middle class family that could get me through university, that’s been brilliant.
Because I’ve been able to use my brain to make money, but unfortunately right now computers are about to do to me what robots and machines did to my farm working, factory working uncles and grandparents. They’re about to make me redundant because they can think faster than I can. They can think more than I can. They don’t need to take a break to eat or sleep or all the other things I like to do.
Inside Finance TV has more fantastic video by Graeme Codrington and other experts on the future of business.

Business strategy models have to adaptable to future disruptions and developments. In this TV show Keith Coats of TomorrowToday discusses strategic thinking for leaders.

Business strategy models in an unpredictable world

Leaders have to be future-focused. Levi right now have a great slogan, which says ‘the future has left, so go forth’. Jim Data is a retired futurist and he articulated that past thinking amongst futurists was something like this … I might have some of the percentages slightly wrong but the rough ratios is 80% of our tomorrows would be built on what futurists call continuations, so if you want to understand tomorrow, look at the DNA of today, 80%. 15% would be cycles – economic, political social cycles – and 5% would be novelties. Now, in the futurist language a novelty is the curve ball, the unexpected, the 9/11, the thing that very few people could foresee. I’ll preface that with past thinking. Current thinking amongst futurists has inverted that table, turned it on its head. They are telling us that up to 80% of our tomorrow is what they call novelty, we simply do not know. Now, even if they’re half correct I wouldn’t go to war over those percentages, it’s the trend here we’re looking at, that the bulk of our tomorrows is going to be a surprise, going to be the unexpected, the unpredictable. The question then becomes how do you build continuity in that? What does the organisation that learns how to build planes in the air, as it were, look like in that context? For one thing it renders redundant strategic planning, you cannot plan your way into that kind of uncertainty. We need companies today who understand the emphasis needs to be on strategic thinking and at all levels of the organisation, this is a leadership agenda.

Inside Finance is very interested in business strategy models and the future business world. Browse our video player for related content.

Business communication about director pay is important

Business communication between company leaders, shareholders and the workforce explaining the reasoning of a director's pay could help satisfy everyone. Caroline Newsholme explains further in this TV show.

Business communication is vital

A lot of shareholders probably feel dissatisfied and feel that director’s remuneration is more and more out of kilter, in some instances, with reality. When you look at what some directors are being paid it does feel a very long way from the average wage of a shareholder or a member of the workforce of that particular organisation, so there is bound to be increasing focus on what directors are being paid and how they are being rewarded. I think people just want to understand that they’re worth it and that it is justified.

Dynamic boards are now using expertise form generation y to inform their business development. In this TV show Peter Klauber discusses this change.

Modern thinking in dynamic boards

I think Y generation has a lot to answer for. I think it is fantastic. Ideas come from everywhere in an organisation not just the board. I think most switched on companies will enable everyone to add some opinion to the process of business development. We now have very dynamic boards with all ages, looking for expertise to help and there's no fear in using it.

Business Disruption: Understanding the cost of absence

Business disruption from absence is bigger than may leaders realise. In this TV show Matthew Haswell answers the question - Do business owners understand the cost of absence?

Awareness of business disruption

I don’t think they do, I mean that’s a broad brush answer, I don’t think they do because sickness absence costs, although in a couple of years, in the last year they have actually gone down slightly but as an overall cost it’s still pretty huge for UK industry particularly, well the private sector most research is done on. Now health and wellbeing and employee engagement and connection and holistic approaches to health and wellbeing is a subject that a lot of people, particularly HR consider, whether HR directors consider it from a cost perspective only or they actually think about holistic products is another question. I think what we’d like to do is encourage finance and HR to look at the question of sickness absence together and come up with a strategy to actually minimise the impact. It’s very difficult to get a finance director to sign off on a request from HR when the finance director can’t actually see why putting these procedures in place or even purchasing insurance or the health related products can actually help matters.

Inside Finance will continue bring you expert insight in to business disruption and related topics.

Person centred planning: A survey of family office clients

Person centred planning means understanding the needs of the client and working from there. In this TV show Charles Gowlland of Smith & Williamson discusses the survey they did to find out about their family office clients.

Research for person centred planning

We wanted to understand what our family office contacts and clients were thinking about all manner of subjects, not just about investments or tax or education but a whole number of topics, so we interviewed over the course of 2013 nearly 40 families with whom we had contact and some of whom we acted for already, most of whom we acted for already and in total their wealth we estimated over a billion pounds. We wanted to get the broadest possible idea of what people were thinking and so we were conscious to try to ask some entrepreneurs, newer money, perhaps the two generations, the generation that had made it, who might have had young children, as well as much more established money that might have been in existence for five or six generations. Because we act for such a wide range of clients we were able to sort of capture what they all thought.

If you enjoyed this video about person centred planning, please browse more videos on Inside Finance TV.

Business strategy models: The role of sick pay policies

Business strategy models will involve pre-empting business disruptions and being ready to deal with them. Some issues will be more sensitive than others. In this TV show Matthew Haswell discusses sick pay policy.

Good business strategy models pre-empt difficult situations

The pure cost in terms of sick pay to be paid to someone who is off long term sick is very much reliant on the sick pay policy that the employer has, if they only pay statutory sick pay that’s obviously going to be a fairly low cost, if they have a promise to maintain that individuals salary for say three months, six months, obviously the cost will be higher. What we are finding, particularly in smaller companies is that some employers only tend to think about these kind of strategies when the event occurs. Now it’s very difficult if you don’t actually have a sick pay policy to suddenly try and make one up when someone goes off sick and it’s also very difficult to just say ‘Right we’re going to stop paying you full pay after a month’ if that’s not in contracts of employment or that’s not something that’s been communicated to staff prior to the event of sickness.

Keep watching Inside Finance for more expert insight into good business strategy models and similar subjects.

Business disruption: Partnerships and LLPs scramble to make deadlines

Business disruption can come from government legislative changes. In this TV show Pamela Sayers explains the impact of the Finance Bill 2014.

Finance Bill causes business distruption

The reaction I’m seeing at the moment is that partnerships, LLPs, are now waking up to the fact that this is going to affect them. Interestingly, we undertook a survey in the summer and of the respondents, of which there was just over 100, only half the respondents thought that the Partnership Consultation Document would affect them. I suspect if we asked the same question now it would be 100%. they have left firms with so little time to put their affairs and consider the quite stringent conditions to put things in place by 6th April. In fact one of the representations that we will be making is that actually all of this legislation should be deferred by 12 months. What we have is some draft proposals for the 2014 Finance Bill with some guidance notes attached. The guidance notes lack so much clarity that what we’re expecting, perhaps at the end of February, beginning of March, is much more detailed guidance, but I suspect that is still going to leave a lot of unanswered questions.
Browse all TV shows on Inside Finance for more expert discussion on business disruption factors.

The attitude to risk will change depending on how much there is to lose. As Charles Gowlland explains in this TV show a Smith and Williamson survey found that threats to wealth are a common concern.

Fearful attitude to risk

There were a number of things, I think when we looked at the results of the survey we weren’t completely shocked or surprised by anything that came in and to a certain extent that gave us a lot of reassurance that we already had a good sense of what they were thinking and what they were worried about. So from that point of view there were no radical shocks. But I still think there were a couple of aspects that came out of it that were interesting to us. One of the areas was the concept of threats to wealth, I mean this is obviously one of the big long term issues for families. They’ve made their money or they’ve inherited it, how do they ensure that that money, that wealth persists through the generation and there were four main categories of threats to wealth as far as we could see it, and what was interesting I think about the response was that they were broadly similar in that people were equally worried about each of those and there wasn’t any particular split by, if I can put it like this, by how old the money was. So in other words these fears were common to all types of clients and those categories were legislative change that might be adverse league or tax, the financial mismanagement, the children squandering the money or volatility in financial markets. And included in those was inflation, and I think certainly for some families with a long and bitter history, inflation for them was a big worry.

Keep an eye on Inside Finance for more great TV shows on attitude to risk and other related subjects.

Business assets must be allocated carefully

Business assets that are allocated correctly can potentially contribute 90% return to a portfolio, as Michael Pagliari discusses in this TV show.

Spending time allocating business assets

One of my pet hates is seeing, you know, proposals sent out to clients that are very deterministic in nature, in other words coming up with a particular solution to a client’s investment problems. I think, you know, it’s much more complex than that and really the whole question about risk and asset allocation is absolutely key, and I think there have been plenty of studies which have been done which show that asset allocation, good asset allocation, contributes about 90% of the total return to a portfolio. So it’s really, really important that a lot of time is spent at the beginning and during the course of a relationship focusing on getting that asset allocation as good as you possibly can.